Description
Title: Price Transmission Analysis of the Global Soybean Market in the Context of a Trade War
Abstract: In order to examine the effects of the US-China trade war, this study used econometric techniques and economic models to analyze the dynamics of the global soybean market. Using monthly time-series data, it took into account the analysis of “spatial” (horizontal) price transmission over a roughly ten-year span from September 2009 to May 2019. The study concentrated on China, the USA, the EU, Brazil, and Argentina as the top exporters of soybeans worldwide. Numerous econometric methods were used. The augmented Dickey-Fuller (ADF) unit root test was used to determine whether the price time series was stationary. The ADF test with breaks test and the Bai-Perron multiple break test were used to infer structural breaks. The Johansen cointegration test (1988), with the prior breaks input as dummy variables, was used to determine the long-term relationship or cointegration among the series. Using the Granger method, the causality’s direction was deduced. test for causality (1969). The vector autoregression model (VAR) and the vector error correction model were used to determine the long-term and short-term causal relations (VECM). The findings indicated a very effective and cointegrated market. Tariffs and subsidies, which served as trade war incidents, had negligible effects on market effectiveness, cointegration, and price transmission. The market under study was able to avoid the tariffs through its arbitrage process. In other words, the argument that the law of one price (LOOP) was false was not supported by any empirical data.
Keywords: agricultural economics; econometrics; price transmission; soybean market; trade war; US–China trade war
Paper Quality: SCOPUS / Web of Science Level Research Paper
Subject: Economics
Writer Experience: 20+ Years
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